The NAA/NMHC Legislative Forecast: Congress will discuss a variety of issues that concern the multifamily housing industry this year. A summary of these issues appears in this National Apartment Association/National Multi Housing Council Joint Legislative Forecast.

Normally during a congressional and presidential election year, as 2004 is, we would expect a lot of action as legislators attempt to produce a list of accomplishments to help carry them to re-election victory on Nov. 2, according to Jim Arbury, NAA/NMHC Joint Legislative Program Senior "vice President for Government Affairs. But this year could be different, he said.

After an extremely active two-year session that resulted in numerous tax cuts, Medicare reform with expansions and new spending programs to counteract the economic downturn, the 2004 congressional session may produce a lot of arm waving, but little action.

Much depends on the economy: Both political parties will be reading the economic tea leaves to determine if the nascent financial recovery will finally turn into a robust jobs recovery. Until we know that, mounting deficits and debate over our continued involvement in Iraq will make it difficult for Congress to pass new tax cuts.

This could work to the "advantage of the apartment industry, however. To begin, uncertainty will make it difficult for lawmakers to pass further tax benefits to encourage homeownership. It may also discourage Congress from permanently repealing estate taxes, which would harm commercial real estate owners since repeal also eliminates the ability of heirs to lower their tax bill by stepping up the basis of their inherited property. With no surplus to fund such an expensive proposition, NAA/NMHC can make the case for less expensive reductions in estate tax rates instead of outright repeal.

Never shy about making predictions, Arbury said he thinks the focus of 2004 will be on Iraq and how the economy has reacted to all of the legislative action of 2002 and 2003. That said, he points out that we cannot let our guard down in case legislative activity does heat up. By the time NAA's Capitol Conference convenes March 20-23, Congress will be well into its session. It is critical that apartment leaders be there in order to further our relationships and make our case both for and against key issues.

Select Topics to Watch

Following are details on other key legislative and regulatory topics for 2004:

Rent Control. State and local governments looking for a quick fix to their affordable housing shortages often turn to rent control, even though research shows that rent control will not provide the relief they are seeking and may make conditions worse. NAA/NMHC will remain vigilant on this issue. In 2003, NAA, NMHC and local affiliates spent much time opposing measures to expand or enact rent control. After successfully defeating measures in Cambridge, Mass., and New York City, attention in 2004 will turn to California where the legislature held over a bill that would allow local jurisdictions to implement rent control on new properties. While the bill is still pending, however, prospects for passage in 2004 are dim because newly elected California Gov. Arnold Schwarzenegger is not likely to support this initiative.

Energy. Prospects for an energy bill also are uncertain. A compromise version crafted by a House-Senate conference committee passed the House in November, but was blocked by a bipartisan filibuster in the Senate. The Senate is under pressure from the Bush administration to pass a final measure in 2004, but the current bill is very complex, very costly and held together by a fragile coalition of lawmakers from states that grow corn for ethanol production (critics say the process to produce ethanol consumes an equal amount of energy) and states that produce oil (critics say the tax incentives are too generous). Critics say the bill fails to provide enough incentives for conservation and does not solve the problems in our electricity distribution system. They also object because it does not allow drilling for oil in domestic areas such as the Arctic National Wildlife Refuge.

Of particular interest to the apartment industry is an NAA/NMHC-supported new tax deduction, modified from the original Senate legislation, for owners of newly developed or renovated commercial buildings (including rental housing) of up to $1.50 per square foot for expenditures that contribute toward a certain overall energy-efficiency rating. The final bill does not contain a NAA/NMHC-endorsed $30 tax credit for water submeters that was previously approved by the Senate. NAA/NMHC will continue to look for opportunities to get tax incentives for energy efficient building techniques and systems.

Indoor Air Quality. The National Academy of Sciences (NAS) is expected to release a long-awaited report on the adverse health effects of mold in 2004. NAA/NMHC have successfully urged federal, state and local legislators to refrain from passing "mold legislation" until better science is available. While NAA/NMHC do not expect the NAS report to set permissible exposure standards, it is likely to establish some research priorities and we could see federal legislation move that would direct research or establish other programs in this area.

Class-Action Tort Reform. This reform came even closer to passing than the energy bill; only one vote shy of shutting off a filibuster. There is talk that three Senators might switch their votes if further modifications are made to the legislation. Of course, there is the chance that the modifications will significantly weaken the effect of the reform, resulting in a so-called "nothing burger."

Bankruptcy Reform. Bankruptcy reform legislation, including a NAA/NMHC provision to stop the abuse of the system by residents who have no intention of paying their rent, remains stalled. There is a chance it could finally slip through, but it is not likely. Each time we have been close to scoring on bankruptcy reform, some spurious issue is thrown into the mix and Lucy pulls the football away just as it is about to be kicked.

Extension of Brownfields Expensing. Congress failed to pass legislation renewing several tax provisions that expired Dec. 31, 2003. This includes Section 198 of the Internal Revenue Code, which allows owners to immediately expense the costs associated with remediating brownfields.

Because House and Senate leaders were unable to agree on the length of any extensions, as well as the need to pay for, or "offset," the loss of revenues to the Treasury, Congress must revisit the issue in early 2004. NAA/NMHC support a temporary extension of the current law, but also are urging Congress to make the provision permanent and to broaden coverage to include asbestos, pesticides, radon and lead-based paint remediation and removal

NFPA vs. ICC Code Adoption. NAA/NMHC will continue to press for local adoption of the International Code Council's (ICC) model codes instead of the competing NFPA 5000 Building Construction and Safety Code. NAA/NMHC oppose the adoption of NFPA 5000-2003 because the code is incomplete, unenforceable and technically unsound. The code is missing specific language setting basic requirements and many of the requirements are unclear. Most important, unlike the ICC codes, the NFPA 5000 has not been designated as a "safe harbor" for compliance with federal fair housing accessibility regulations. While 48 states and the Department of Defense (DoD) have adopted one or more of the ICC codes, some jurisdictions--namely Phoenix and the state of California--are considering the inferior NFPA 5000. For information on why NAA/NMHC support the ICC codes over competing codes, see www.naahq.org/government/issues.aspx.

Non-Metallic Sheathed Cable. Years of dogged determination by NAA/NMHC have finally resulted in code changes that allow more apartment builders to use less expensive non-metallic sheathed (NM) cable, specifically in taller buildings. Prior to the 2002 National Electrical Code (NEC) and the 2003 ICC Electrical Code, NM cable was only allowed in buildings three stories or less. The new codes, however, expand the use of NM cable. But the electrical industry continues to oppose our victories and is expected to submit proposals at the 2004 NEC and ICC code hearings to roll back NAA/NMHC victories in future editions of the codes. NAA/NMHC will be vigilant in defending the wider use of NM cable at all code hearings.

Section 8. NAA/NMHC will continue a long-standing effort to reform the Section 8 program to make it less burdensome and more attractive to apartment owners and will work to oppose any proposals to turn the program into a state-based block grant, as was proposed by the administration in 2003. NAA/NMHC testified twice this summer before the U.S. House of Representatives to oppose the block grant measure. Testifying on behalf of NAA/NMHC were Andrew Showe, Showe Management Corp., and 2003 NAA President Tom Shelton, Greystar Real Estate Partners. Both witnesses told legislators that the best way to expand the amount of housing available to voucher holders is to remove the bureaucratic obstacles and delays that discourage private owners from accepting vouchers.

HUD/FHA Multifamily Insurance Program. NAA/NMHC will continue to push for improvements in the FHA multifamily loan insurance program, specifically expanding the use of FHA insurance for variable rate tax-exempt bonds. HUD's proposals to date have provided a competitive option to meet the market's needs.

At the end of 2003, NAA/NMHC called on HUD to create an advisory team that includes industry participants to help FHA craft a workable program. In addition, HUD will be working on regulations to implement legislation passed in 2003 to increase the FHA multifamily loan bruits for high-cost areas. While Congress has set higher maximums, regulations are needed to determine which areas qualify and what the requirements will be for project-by-project approvals. NAA/NMHC will work closely with HUD to make sure the regulations are developed in a timely manner.

Exit Tax Relief. Congress is considering legislation (H.R. 3485) to provide "exit tax" relief to owners of affordable properties who sell them to new owners committed to preserving their affordability. The legislation intends to address the problem of owners who are hesitant to sell federally assisted housing (e.g., project-based Section 8, Section 236, Section 221(d)(3) or Low-Income Housing Tax Credits) to preservation purchasers because of the capital gains tax burden they would face upon the sale. NAA/NMHC are helping form a coalition to support the legislation.

Low-Income Housing Tax Credit (LIHTC). NAA/NMHC will continue to work with the Internal Revenue Service to change how resident-paid utilities are estimated for LIHTC properties. This is an important technical matter because the maximum rent levels are based on this information in cases where residents pay all or part their utilities (electric, gas and water). The current system uses outdated or inappropriate data. Updating it could increase rental income for many owners 3 percent to 5 percent in select areas.

National Housing Trust Fund. Housing advocates will continue to press for the creation of a national housing trust fund in 2004. Proponents seek legislation authorizing a dedicated federal fund to subsidize the development and preservation of affordable housing, and in particular rental housing. A measure pending in the House has 209 co-sponsors, but a Senate version has more limited support with just two co-sponsors. NAA/NMHC support the concept, but object to the source of capital identified in the legislation. The pending bill would use excess proceeds from the FHA insured loan program to fund the Trust Fund. Since it is unclear whether this would adversely affect the FHA multifamily insurance program by keeping premiums higher than necessary to cover actual portfolio losses, NAA/NMHC have not provided active support for the legislative proposals.

Consumer Privacy Regulations. During the last six months of 2003, one new regulation and two new laws went into effect that affect how real estate firms market themselves, how they screen residents and employees, and how they access consumer credit reports. They include the federal Do Not Call/Do Not Fax regulations, an anti-spam law and a law expanding the Fair Credit Reporting Act. In 2004, the Federal Trade Commission will issue regulations that precisely define the sort of commercial email messages that are subject to sender/subject identification, opt-out, and other requirements of the new CAN-SPAM Act. The commission will also issue regulations implementing the new Fair and Accurate Credit Transactions Act that will govern the use of consumer reports, appropriate responses to consumer inquiries about their rental history and appropriate steps to safeguard nonpublic consumer information.

Mailbox Standards. Having convinced the U.S. Postal Service to back-off from its original proposal to require all existing apartment communities to be retrofitted with new and larger mailboxes, NAA/NMHC continue discussions on when the new standard sizes should be required in new construction. NAA/NMHC believe there should be a 30-month lead time while the USPS (at presstime) is seeking to implement its rule within one year.

Wage-Hour Rules. The Department of Labor intends to release a controversial update to the way in which overtime pay is calculated for the nation's employees. The proposed simplified approach could increase the risk of Department of Labor audits of pay practices and employee job classifications by apartment firms as well as business generally.

NAA/NMHC Joint Legislative Staff

James N. Arbury NAA/NMHC Senior Vice President of Government Affairs

Before joining NAA/NMHC in 1993, Arbury spent 13 years on the staff of former U.S. Sen. Donald W. Riegle (D-Mich.), first as Chief of Staff and then as Senior Policy Advisor with special emphasis on tax issues. Prior to that, he held various financial and general management positions with Ernst & Young, Chrysler Corp., Accuray Corp., Brand-Rex Wire & Cable and Ensign Bickford Co. He has a master's degree in business administration and is a CPA.

As NAA/NMHC Senior Vice President, Arbury is involved in the oversight of the entire Joint Legislative program and the legal issues that are associated with the NAA/NMHC legislative/regulatory agenda.

Lisa Blackwell NAA/NMHC Vice President of Housing Policy Initiatives

Blackwell brings more than 20 years of government affairs and real estate experience to NMHC. Most recently, she was the Managing Director of Government Affairs for the American Institute of Architects, where she developed legislative strategies on behalf of the nation's architects. Prior to that, she spent nine years with the National Association of Realtors working on a variety of housing issues. She also directed Cornell University's government relations program and worked for two New York State members of Congress.

Blackwell complements NAA/NMHC's federal legislative and regulatory program by mobilizing members and resources to respond to apartment-related issues at the state and local level. At the federal level, she also manages select housing issues for the NMHC/NAA Joint Legislative Program.

Eileen C. Lee, Ph.D. NAA/NMHC Vice President, Environment

During her eight-year tenure working with Congress, Lee served as Staff Director of the Environment Subcommittee of the Committee on Science, Space, and Technology of the U.S. House of Representatives. This subcommittee had legislative and oversight authority for the research and development portfolios of the U.S. Environmental Protection Agency, the U.S. Deportment of Energy and the U.S. Department of Commerce. She serves on the board of directors for The National Foundation for Environmental Research.

As Vice President of Environment, Lee handles a wide variety of issues, including mold and indoor air quality, lead-based paint, energy, utility submetering and brownfields.

David Cardwell NAA/NMHC Vice President of Finance and Technology

Prior to working with the Joint Legislative staff, Cardwell was the Senior Manager for Product Development at Freddie Mac. He also held positions as the Manager of Loan Production and Product Development and as the Manager of the Community Development Investment Group at Freddie Mac. Before working at Freddie Mac, he served in the Office of Affordable Housing Programs at the U.S. Department of Housing and Urban Development, as Director of Business and Redevelopment Activities for Monarc Construction/Trammell Crow Residential, and as Economic Development Director for the City of Falls Church, Va.

Cardwell has lead responsibility for monitoring industry capital developments, including the regulatory environment for apartment financing. He also spearheads the industry's technology and MITS data standards initiative.

Kimberly D. Duty NAA/NMHC Vice President of Communications

Prior to working with NAA/NMHC, Duty was the Assistant Director of the National Association of Home Builderis (NAHB) Multifamily Council. Before working for NAHB, she was the Director of Membership for a local Chamber of Commerce and spent 18 months in Berlin, Germany, at the Berlin Public Affairs office.

At NMHC, Duty manages the Joint Legislative Program's communications, including member newsletters, the NMHC Web site and NMHC's public relations efforts.

James "Jay" Harri NAA/NMHC Vice President of Property Management

Before coming to NAA/NMHC, Harris ran the Housing Credit Group at NAHB. Harris is a contributing writer for UNITS magazine and sits on boards of a number of real estate publications and university real estate education programs.

As Vice President of Property Management for NAA/NMHC, Harris covers insurance and risk management, rent collections, resident screening, consumer privacy, bankruptcy, premises security, fair housing/accessible design and human capital issues.

Ronald G. Nickson NAA/NMHC Vice President, Building Codes

Nickson has more than 30 years of experience with each of the model building code organizations. Prior to working with NAA/ NMHC, he served as Director of the Energy and Home Environment Department at NAHB. Nickson has served on several technical standards writing committees and the Virginia State Technical Review.

At NAA/NMHC Nickson represents the multifamily housing industry in the model building code process. As a result of his leadership, NAA/NMHC has secured code changes that save the industry more than $1.2 billion a year in construction costs.

Howard A. Menell NAA/NMHC Tax Advisor

Menell brings extensive legislative and regulatory experience to the NAA/NMHC tax program. He has held important high level, housing-related positions in government. He was Special Counsel to the Ranking Minority Member far the House Committee on Financial Services; worked at HUD; and served as both Majority Staff Director and Minority Staff Director for the U.S. Senate's Committee on Banking, Housing and Urban Affairs. In the private sector, he has practiced law and served as Vice President for Government Affairs for the American Express Co.

As Tax Advisor, Menell has principal responsibility for federal and state tax issues.

Mark H. Obrinsky, Ph.D. NAA/NMHC Vice President of Research

Prior to working for NAA/NMHC, Obrinsky was the Director of Regulatory Policy at Fannie Mae. Prior positions at Fannie Mae also included Director of Applied Portfolio Research and Senior Economist.

Before joining Fannie Mae, Obrinsky was Deputy Director of the Economics Department at the U.S. League of Savings Institutions. He taught economics at the University of Delaware and Bradley University for seven years.

Obrinsky holds a Ph.D. in economics from the University of Pennsylvania. He has principal responsibility for housing and economic research.

Michael H. Tucker NAA/NMHC Communications Director

Tucker serves as the NAA/NMHC Joint Legislative Program's primary writer and assists with federal advocacy efforts. Prior to joining NMHC, Michael served as Program Manager at the American Institute of Architects, where he managed the housing and urban design committees, and worked in the Institute's Center for Livable Communities smart growth initiative. A freelance writer, Michael has written for U.S. News & World Report, AIArchitect, and the Binghamton, N.Y., Press & Sun-Bulletin, among others.

Elizabeth Feigin Befus NAA/NMHC Legislative Analyst

Elizabeth Feigin Befus received a bachelor's degree in political science from Colorado State University and a Juris Doctorate from the University of Iowa College of Law. She has served us Attorney Advisor with the U.S. Department of Labor and is a member of the Colorado State and District of Columbia bars.

As Legislative Analyst, Feigin Befus has primary responsibility for special projects related to property management, insurance and human resources.

Alex Hecht NAA/NMHC Legislative Analyst

Prior to joining NAA/NMHC, Hecht served as a Legal Assistant with the Maryland Office of the Attorney General. A former sportswriter and award-winning journalist, Hecht holds a bachelor of arts degree in English and history from the University of Texas at Austin and a Juris Doctorate degree from the University of Houston Law Center.

As an NAA/NMHC Legislative Analyst, Hecht has primary responsibility for special projects for environmental issues of the Joint Legislative Staff.

Michele Cherry NAA/NMHC Legislative and Web Site Manager

Michele Cherry serves as Administrator of the Apartment Industry Mobilization Service (AIMS), the apartment industry's central legislative information and alert system and Custodian of Records for, and manages the reporting requirements of, the NMHC Political Action Committee.

Paul R. Bergeron III is NAA's Director of Communications. He can be reached at [e-mail].